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HSN, Inc. Reports Fourth Quarter And Full Year 2012 Results

Highlights for the Fourth Quarter 2012:

  • Net sales increased 7%
  • Digital sales up 13% with penetration increasing to 47%
  • Diluted EPS from continuing operations increased 27%

ST. PETERSBURG, Fla., Feb. 21, 2013 (GLOBE NEWSWIRE) -- HSN, Inc . (Nasdaq:HSNI) reported results for the fourth quarter and full year ended December 31, 2012 for HSN, Inc. ("HSNi" or "Company") and its two operating segments, HSN and Cornerstone.

Table 1            
SUMMARY RESULTS AND KEY OPERATING METRICS (a)
($ in millions, except per share and average price point amounts)
             
   Q4 2012   Q4 2011   Change   FY 2012   FY 2011   Change 
             
Net Sales  $ 982.9  $ 922.0 7%  $ 3,266.7  $ 3,069.4 6%
Non-GAAP:            
Adjusted EBITDA  $ 106.6  $ 102.9 4%  $ 324.3  $ 302.8 7%
Adjusted EPS (b)  $ 1.00  $ 0.79 27%  $ 2.64  $ 2.10 26%
GAAP:            
Operating Income (c)  $ 92.8  $ 86.2 8%  $ 258.7  $ 239.0 8%
Income from continuing operations (c)(d)  $ 56.0  $ 48.2 16%  $ 136.5  $ 127.7 7%
Diluted EPS from continuing operations (c)(d)  $ 1.00  $ 0.79 27%  $ 2.36  $ 2.10 12%
             
HSNi:            
Average price point  $ 62.22  $ 64.06 (3%)  $ 62.92  $ 64.47 (2%)
Units shipped (millions)  18.1  16.6 9%  59.6  55.0 8%
Gross profit margin  34.4%  34.9% (50 bps)  36.2%  35.8% 40 bps
Return rate   16.9%  18.0% 110 bps  17.8%  18.5% 70 bps
Digital sales penetration   46.9%  44.4% 250 bps         44.5%         41.8% 270 bps
             
(a)  HSNi's two operating segments, HSN and Cornerstone, are presented separately in Tables 2 and 3 of this release.
             
(b)  Effective with the fourth quarter of 2012, HSNi modified its definition of Adjusted Net Income and Adjusted EPS. See definitions and reconciliations of Non-GAAP to GAAP measures in Table 4.
             
(c)  Results for the year ended December 31, 2012 include a sales tax settlement of $7.8 million, or $4.8 million net of taxes, or $0.08 per diluted share.
             
(d)  Results for the year ended December 31, 2012 include costs associated with the redemption of Senior Notes of $18.6 million, or $11.6 million net of taxes, or $0.20 per diluted share.

Fourth Quarter 2012 Results vs Fourth Quarter 2011 Results

  • HSNi's net sales grew 7% over the prior year to $982.9 million. HSN's net sales increased 7% to $683.8 million, including 11% growth in digital sales. Cornerstone's net sales for the 13-week period in 2012 increased 6% to $299.1 million, including 14% growth in digital sales, compared to the 14-week period in 2011.  
  • HSNi's Adjusted EBITDA increased 4% to $106.6 million and operating income increased 8% to $92.8 million. These results were driven by a 7% increase in net sales, partially offset by a 50 basis point decrease in gross profit margin and 6% increase in operating expenses (excluding non-cash charges). Operating income was also favorably impacted by a reduction in stock-based compensation.  
  • GAAP diluted EPS from continuing operations increased 27% to $1.00 compared to $0.79 in the prior year.   
  • During the fourth quarter, HSNi repurchased 0.7 million shares of its common stock at a cost of $33.2 million, or an average cost of $49.20 per share. From inception of the share repurchase program through February 20, 2013, HSNi repurchased a total of 6.3 million shares at a cost of $248.7 million, or an average cost of $39.77 per share.

Full Year 2012 Results vs Full Year 2011 Results

  • HSNi's annual net sales grew 6% over the prior year to $3.3 billion. HSN's net sales increased 5% to $2.3 billion, including 10% growth in digital sales. Cornerstone's net sales for the 52-week period in 2012 increased 10% to $1.0 billion, including 18% growth in digital sales, compared to the 53-week period in 2011.  
  • HSNi's annual Adjusted EBITDA increased 7% to $324.3 million. This result was driven by a 6% increase in net sales and a 40 basis point increase in gross profit margin, partially offset by an 8% increase in operating expenses (excluding non-cash charges and a $7.8 million sales tax settlement). HSNi's operating income increased 8% to $258.7 million.   
  • Adjusted EPS increased 26% to $2.64 compared to $2.10 in the prior year. GAAP diluted EPS from continuing operations increased 12% to $2.36 compared to $2.10 in the prior year. Included in GAAP income from continuing operations were costs associated with the redemption of Senior Notes of $11.6 million, net of taxes, or $0.20 per diluted share, and a sales tax settlement charge of $4.8 million, net of taxes, or $0.08 per diluted share.

"Our results for the quarter and the year at HSNi reflect our ability to capitalize on the shift in retail driven by technology, social networks and mobility," said Mindy Grossman, CEO of HSN, Inc. "The Company achieved 7% sales growth and 27% EPS growth for the quarter and digital penetration increased 250 basis points to 47%, almost half of our total business. HSN experienced a number of key milestones, including 3% growth in its customer file—the largest in five years—and retention rates achieving 10-year highs. HSN's mobile sales continued to accelerate, reaching $63 million in the quarter, nearly exceeding total mobile sales for all of 2011."

Table 2            
SEGMENT RESULTS
($ in millions)
             
  Three Months Ended December 31, Year Ended December 31,
  2012 2011 Change 2012 2011 Change
  (a) (b)    
Net Sales            
HSN  $ 683.8  $ 639.2 7%  $ 2,265.0  $ 2,160.3 5%
Cornerstone  299.1  282.8 6%  1,001.7  909.0 10%
Total HSNi  $ 982.9  $ 922.0 7%  $ 3,266.7  $ 3,069.4 6%
             
Gross Profit            
HSN  $ 224.8  $ 211.9 6%  $ 786.7  $ 741.3 6%
Cornerstone  113.1  109.8 3%  397.1  359.0 11%
Total HSNi  $ 337.8  $ 321.7 5%  $ 1,183.7  $ 1,100.3 8%
             
Adjusted EBITDA (Non-GAAP measure)            
HSN  $ 84.0  $ 79.5 6%  $ 250.8  $ 235.2 7%
Cornerstone  22.6  23.4 (3%)  73.4  67.6 9%
Total HSNi  $ 106.6  $ 102.9 4%  $ 324.3  $ 302.8 7%
             
Operating Income            
HSN  $ 74.7  $ 70.0 7%  $ 212.5  $ 192.9 10%
Cornerstone (c)  18.1  16.2 11%  46.2  46.1 0%
Total HSNi  $ 92.8  $ 86.2 8%  $ 258.7  $ 239.0 8%
             
(a) Q4 2012 includes a 13-week period for Cornerstone compared to a 14-week period in the prior year.
(b) FY 2012 includes a 52-week period for Cornerstone compared to a 53-week period in the prior year.
(c) Results for the year ended December 31, 2012 include a sales tax settlement of $7.8 million.
             
See reconciliation of non-GAAP to GAAP measures in Table 4.
       
Table 3      
SEGMENT KEY OPERATING METRICS
             
  Three Months Ended December 31, Year Ended December 31,
  2012 2011  Change  2012 2011  Change 
HSN:            
Average price point  $ 61.51  $ 63.65 (3%)  $ 60.57  $ 62.79 (4%)
Units shipped (millions)  13.3  12.1 10%  44.7  41.3 8%
Gross profit margin  32.9%  33.2% (30 bps)  34.7%  34.3% 40 bps
Return rate  18.6%  19.5% 90 bps  19.5%  20.0% 50 bps
Digital sales penetration  37.6%  36.2% 140 bps  35.4%  33.8% 160 bps
Cornerstone:            
Average price point  $ 64.07  $ 65.07 (2%)  $ 69.68  $ 69.32 1%
Units shipped (millions)  4.8  4.5 7%  14.9  13.7 9%
Gross profit margin  37.8%  38.8% (100 bps)  39.6%  39.5% 10 bps
Return rate  12.8%  14.2% 140 bps  13.4%  14.7% 130 bps
Digital sales penetration  68.2%  63.2% 500 bps 65.0% 60.7% 430 bps
Catalog circulation (millions)  76.9  77.3 (1%)  300.3  273.5 10%

HSN Segment Results for the Fourth Quarter 2012

HSN's net sales were $683.8 million, an increase of 7% from the prior year. Digital sales grew 11% with penetration increasing 140 basis points to 37.6%. Sales were strong in electronics, home design, household and beauty, partially offset by lower sales in jewelry.  Shipping and handling revenue decreased 10% primarily due to an increase in shipping and handling promotions. The average price point decreased 3%, the units shipped increased 10% and the return rate decreased 90 basis points to 18.6% primarily due to changes in product mix. 

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